November 7, 2024
H1 2009 results: Results reflect unprecedented advertising market conditions
- Paris
• Revenues down 13.3% to €925.4 million, organic revenues down 13.8%
• Operating margin decreases 40.0% to €166.4 million
• EBIT down 70.1% to €49.5 million
• Net income Group share decreases 95.6% to €4.4 million
• Cost optimization program on track / Capex down 40% to €96.7m
• Visibility remains very low / Q3 organic revenue performance expected to be broadly in line with H1
Paris, 31 July 2009 – JCDecaux SA (Euronext Paris: DEC), the number one outdoor advertising company in Europe and Asia-Pacific and the number two worldwide, published today its 2009 half year financial results.
Revenues for the six months ended 30 June 2009 were down 13.3% to €925.4 million compared to the same period last year. Excluding acquisitions and the impact of foreign exchange, organic revenue decline was 13.8%. Core advertising revenues, excluding revenues related to the sale, rental and maintenance of street furniture products decreased by 14.2% organically over the period. In the second quarter, consolidated revenues decreased by 14.5% to €500.8 million (-15.3% on an organic basis) compared to the same period last year, which was a strong comparable. The Group continued to suffer from the global weakness of the advertising market during the second quarter of the year reflecting unprecedented economic conditions in almost all its geographies and businesses. The continued strong decline in Billboard and the weakening of the Transport division were not offset by the Street furniture division which recorded a similar performance as in the first quarter of 2009. Core advertising revenues decreased by 15.8% organically in the second quarter.
Operating margin decreased by 40.0% to €166.4 million from €277.5 million in the first half of 2008. The Group’s operating margin as a percentage of consolidated revenues was 18.0%, a decrease of 800 basis points compared to the prior period (H1 2008: 26.0%), reflecting the fact that a significant part of the Group’s cost structure is fixed. Nevertheless, the Group managed to partly offset the decline of operating margin through its tight cost management during the first half of 2009, leading to a reduction in costs in the period of €31.1m, reflecting both its cost optimization program and one off cost savings. The Group’s cost optimization program remains on target to deliver a recurrent cost reduction of €50 million in 2010.
EBIT decreased by 70.1% to €49.5m from €165.3m in the first half of 2008, mainly reflecting the lower operating margin. Depreciation slightly increased over the period due to the recent capital expenditures, while spare parts charges slightly decreased.
Commenting on the 2009 first half results, Jean-François Decaux, Chairman of the Board and co-Chief Executive Officer, said:
“The backdrop to these results has been an extremely challenging environment which will lead to the biggest global GDP decline seen in decades. The global advertising market continued to lack volume and to suffer from aggressive pricing, particularly from TV-broadcasters. As expected, the decrease in organic revenues significantly reduced our H1 operating margin although the Group successfully increased its efforts to mitigate this decline and its subsequent impact on free cash flow through tight cost management and reduced capital investment. Free cash flow is close to breakeven and our balance sheet remains sound with a slight decrease in the Group net debt.
Visibility remains very low and business is volatile. Without signs of improvement in market conditions, we currently expect the decline in third quarter organic revenues to be broadly in line with the decline in the first half.
Nevertheless, and as we have previously said, we remain confident in the structural growth opportunity for the outdoor industry in the medium term. We believe that JCDecaux is increasingly well positioned in this industry and the strength of our balance sheet will allow us to take advantage of market opportunities as they arise. A strong focus on cost reduction and selective capital investment will ensure that JCDecaux’s operating margin and free cash flow generation will clearly benefit from the growth in revenues when economic conditions improve.”
HALF-YEARLY FINANCIAL STATEMENTS
Reported revenues
2009 (€m) | 2008 (€m) | Change 09/08 (%) | |||||||
| Q1 | Q2 | H1 | Q1 | Q2 | H1 | Q1 | Q2 | H1 | |
Street Furniture | 198.6 | 246.1 | 444.7 | 238.6 | 287.9 | 526.5 | -16.8 | -14.5 | -15.5 |
Transport | 137.5 | 152.5 | 290.0 | 134.7 | 164.8 | 299.5 | 2.1 | -7.5 | -3.2 |
Billboard | 88.5 | 102.2 | 190.7 | 108.9 | 132.7 | 241.6 | -18.7 | -23.0 | -21.1 |
Total | 424.6 | 500.8 | 925.4 | 482.2 | 585.4 | 1,067.6 | -11.9 | -14.5 | -13.3 |
Organic growth (a)
| € Me€M | Change 09/08 (%) | ||
| 1.1.1.1. | Q1 | Q2 | H1 |
Street Furniture | -14.0 | -12.9 | -13.4 |
Transport | -4.7 | -14.0 | -9.9 |
Billboard | -16.2 | -21.9 | -19.3 |
Total | -11.9 | -15.3 | -13.8 |
Revenues by geographic area:
|
| Reported growth (%) | Organic growth(a) (%) | |
Europe(b) | 321.5 | 400.1 | -19.6 | -18.2 |
France | 271.5 | 307.3 | -11.6 | -11.6 |
Asia-Pacific | 145.2 | 152.2 | -4.6 | -15.4 |
United Kingdom | 82.6 | 123.0 | -32.8 | -22.6 |
North America | 70.5 | 71.0 | -0.7 | -13.3 |
Rest of the World | 34.1 | 14.0 | 143.6 | 158.8 |
Total Group | 925.4 | 1,067.6 | -13.3 | -13.8 |
(a) Excluding acquisitions/divestitures and the impact of foreign exchange
(b) Excluding France and the United Kingdom
Street Furniture:
In the second quarter, revenues decreased by 14.5% to €246.1 million (-12.9% on an organic basis) compared to the same period last year. Core advertising revenues decreased by 14.2% organically.
Revenues for the first half of 2009 decreased by 15.5% to €444.7 million from €526.5 million in the first half of last year. Excluding acquisitions and the impact of foreign exchange, organic revenues decreased by 13.4%. Core advertising revenues, excluding revenues related to the sale, rental and maintenance of street furniture products decreased by 15.0% organically.
Second quarter revenues recorded negative organic revenue growth, but at a lower rate than the first quarter, in most developed markets. Advertising demand remained low, maintaining pressure mainly on occupancy rates. Europe excluding France and the United Kingdom recorded negative organic revenue growth which exceeded the division’s average and remained in line with the performance achieved in the first quarter of the year. Southern Europe, Scandinavia and, to a lesser extent Germany, continued to be the most difficult areas. France achieved a slightly improved performance versus the first quarter with a limited high single digit revenue decline, while the United Kingdom reported a low double digit revenue decline reflecting a demanding 2008 comparable.
Market conditions in North America also remained extremely challenging over the quarter leading to a double-digit organic revenue decline, albeit less than in the first quarter of 2009 as comparables became more favourable.
The Rest of the World continued to produce double digit organic revenue growth with a very good performance from the Group’s operations in Brazil and Qatar.
Transport:
In the second quarter, revenues decreased by 7.5% to €152.5 million (-14.0% on an organic basis).
Revenues decreased by 3.2% over the first half of the year to €290.0 million from €299.5 million in the same period last year. Excluding acquisitions and the impact of foreign exchange, organic revenues decreased by 9.9%.
During the second quarter, the Transport division reported low double-digit organic revenue decline as most major transport markets suffered from the ongoing adverse business conditions and the further deterioration of worldwide airport passenger traffic. Western Europe, including France, the United Kingdom, Spain and Italy were particularly impacted over the quarter while North America continued to perform slightly better than the division’s average thanks to additional assets in the Group’s US airports and the longer term nature of its advertising contracts. Asia-Pacific reported a double-digit organic revenue decline, mainly due to the challenging business environment in Hong Kong and the very demanding 2008 comparables in mainland China.
Newly operated contracts such as Dubai airport, Algiers airport and Bangalore airport continued to perform in line with the Group’s expectations.
Billboard:
In the second quarter, revenues decreased by 23.0% to €102.2 million (-21.9% on an organic basis).
Revenues for the first half of the year decreased by 21.1% to €190.7 million from €241.6 million in the same period last year. Excluding acquisitions and the impact of foreign exchange, organic revenues decreased by 19.3% over the period.
All Billboard markets recorded negative organic revenue growth over the second quarter reflecting ongoing weak demand and intense price competition between operators. France continued to somewhat outperform the division. Trading conditions remained extremely challenging in the United Kingdom and Southern Europe leading to strong double-digit revenue decline. Austria reported a limited single-digit revenue decrease despite highly challenging 2008 comparables due to the euro Championship.
OPERATING MARGIN (1)
2009 | 2008 | Change 09/08 | ||||
H1 (€m) | % | H1 (€m) | % | Value (%) | Margin rate (bp) | |
Street Furniture | 133.6 | 30.0 | 201.5 | 38.3 | (33.7) | (830) |
Transport | 25.0 | 8.6 | 38.3 | 12.8 | (34.7) | (420) |
Billboard | 7.8 | 4.1 | 37.7 | 15.6 | (79.3) | (1,150) |
Total | 166.4 | 18.0 | 277.5 | 26.0 | (40.0) | (800) |
Street Furniture:
Operating margin declined by 33.7% to €133.6 million in the first half of the year. The operating margin as a percentage of revenues was 30.0%, a decrease of 830 basis points from 38.3% in the same period last year.
The strong decrease in operating margin is mainly due to the impact of lower organic revenues on the fixed cost structure of the Street Furniture division despite the successful implementation of the Group cost optimization program, which limited the impact of the negative operating leverage. The current contract renewal cycle as well as the development of operations in new countries also led to start-up and additional operating expenses which further impacted the operating margin.
Transport:
Operating margin decreased by 34.7% to €25.0 million in the first half of the year. The operating margin as a percentage of revenues was 8.6%, a decrease of 420 basis points from 12.8% in the same period last year.
The operating margin declined as a consequence of the lower revenues recorded in almost all countries where the Group operates. The negative impact of the lower revenues was somewhat mitigated by a decrease in rents and fees which are mainly based on revenue sharing agreements. New contracts contributed very slightly to the operating margin.
Billboard:
Operating margin declined by 79.3% to €7.8 million in the first half. The operating margin as a percentage of revenues was 4.1%, a decrease of 1150 basis points from 15.6% in the same period last year.
Negative operating leverage impacted every country of the Group with the most significant declines in the United Kingdom. The Group managed to somewhat mitigate the sharp decline of the operating margin through its cost optimization program and in particular the review of its lease agreements.
EBIT (2)EBIT decreased by 70.1% to €49.5 million from €165.3 million in 2008. The Group’s EBIT margin was 5.3% of consolidated revenues, compared to 15.5% in the same period last year. The decrease in EBIT mainly reflects the lower operating margin as well as increased depreciation and provisions following renewal and new contracts capex. Spare parts charges slightly decreased over the period.
NET FINANCIAL INCOMENet Financial Income was - € 18.1 million compared to - € 22.1 million in the first half of 2008(3), which mainly reflects the decrease in the interest rates.
Equity affiliates- Share of net profit from equity affiliates decreased by €17.7 million to - €12.7 million, compared to
- €5.0 million in the first half of 2008. Due to the further deterioration of the Russian and Ukrainian advertising markets the Group impaired the value of its investment in BigBoard by - €6.6 million. Excluding the impact of impairment charges, share of net profit from equity affiliates were -€6.1 million, down €11.1 million compared to 2008 mainly due to the net losses recorded by some of our affiliates.
Net Income Group share decreased by 95.6% to €4.4 million, compared to €100.9 million in the first half of 2008. This variation mainly reflects the decrease in operating margin and the negative equity affiliates’ results.
Capital expenditureNet capex (acquisition of tangible and intangible assets, net of disposals of assets) was €96.7 million, compared to €161.5 million in the same period last year. This decrease reflects the increased contract selectivity of the Group as well as fewer projects in the first part of the year and the non recurring pre-payment paid in 2008 to the Shanghai Metro authorities (€ 37.0 million). Capital expenditure for the full year is expected to be in the region of €225 million compared to €304 million last year.
FREE Cash flow (4)In the first half of 2009, free cash flow decreased to - €1.7 million from €10.3 million, mainly reflecting the lower net cash flow from operating activities. Free cash flow decrease over the first half of 2009 was limited thanks to the satisfactory cost optimization program and the reduction in capital expenditures.
Net debt (5)Net debt as of 30 June 2009 decreased by €5.3 million to €701.3 million compared to €706.6 million as of 31 December 2008.
(1) Operating Margin = Revenues less Direct Operating Expenses (excluding Maintenance spare parts) less SG&A expenses
(2) EBIT = Earnings Before Interests and Taxes = Operating Margin less Depreciation, amortization and provisions less Impairment of goodwill less Maintenance spare parts less Other operating income and expenses.
(3) Excluding the reassessment of the Gewista's minority shareholder's put option which was extended in 2008 until 2019
(4) Free cash flow = Net cash flow from operating activities less net capital investments (tangible and intangible assets).
(5) Net debt = Debt net of cash including the non-cash impact of IAS39 (on both debt and derivatives) and excluding the non-cash impact of IAS 32 (debt on commitments to purchase minority interests)
Next information:
Q3 2008 revenues & quarterly information: 4 November 2009 (before market)